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tv   Bloomberg Technology  Bloomberg  November 22, 2018 11:00pm-12:00am EST

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>> you're watching "best of bloomberg daybreak: middle east." president trump promises a full report on the jamal khashoggi killing. global market misery deepens. equities falling and oil falling to lows it hasn't seen in a year. is the party over for dubai? yousef: we begin the week with president trump saying the u.s.
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was preparing to issue what he called a very full report. that was after the media reported that the c.i.a. reported that the saudi crown prince ordered the assassination of the clom history in. -- of the columnist. claims trump denies. >> the saudis have again reiterated that deny that the crown prince was in any way involved in this. they are still blaming this on rogue elements. people that they are putting on trial. they have said they are seeking the death penalty for five of the people they are charging with this. at the same time, of course, i mean, this is the "washington post" story. they broke the news. they are saying this is a c.i.a. assessment on the basis that the crown prince is really in charge of day-to-day running of saudi
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arabia and these people being charged, blamed for this are people very, very close to the -- n prince and they cannot there cannot be the possibility that the crown prince did not know what was happening. yousef: it is getting quite difficult in terms of the white house and the tense relationship with congress around this story. trying to defend the relationship with the saudis. >> right. that is really the key here. president trump would like this to go away. the united states, they have a really close relationship with the saudis. president trump is saying they are investing hundreds of billion s of dollars in the u.s. and he is equating that with u.s. jobs. for him, he would like this to
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go away. it seems in the senate and congress, they won't let this go away and one has to take into consideration that we're going to have a democratic dominated congress soon that may be more keen to hold president trump to account on these issues. yousef: we understand that the meeting with the finance netia hue is scheduled. the stakes are very high, aren't they? >> the stakes are high for current coalition. there is an expectation it may fail. it may fall. one has to keep in mind that stop being net huh prime minister. you have pretty much roughly a similar setup as you have before in the coalition.
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come out the winner. there will be a shift in the parties. there is an expectation you will see a complete change in the picture. there is the expectation if the coalition falls, they go to early elections, some people are saying march and you end up with rime minister netia hue again. yousef: we got more with our middle east and equities reporter. >> we saw volatility picking up yesterday. it was declining for about a month now. back to the level it was october 14. it was worst performance for a session since the middle of october. we clearly see we are back to
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this scenario where we were in jamal khashoggi tension. we could clearly see more sharp moves, especially with the big names in saudi arabia. yesterday, we saw a sharp decline with the national commercial bank, a big name in banking in saudi. they have a very important -- owned by the public money in saudi. there could be a very clear reaction there today. >> good morning. what you have seen in terms of the flows going into the saudi stocks. what have you observed so far? >> we have numbers about flows
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from last week, at the end of thursday of last week. so we saw again qualified sellers, vestors, net for the sixth straight week. it is important to know that the volume they sold last week was the highest for almost a month. also if we look back to the moment where we had the peak of the tensions, it seemed like there was a pickup in the selloff by this very specific and very important category, which is q.f.i. these numbers do not reflect what happened yesterday of course. they still show the picture of a week that was probably calmer than the one that we are going to see starting today. we are seeing a pickup in the outflows. we're talking about an important number for the saudis. they have worked hard to bring
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this money in. this is the right moment to put their money to work in saudi arabia. it is definitely not good for the saudi stocks, for the companies and for the authorities to see this money coming out. yousef: let's talk about united emirates. on monday we're going to see reaction. what happened in saudi arabia. they follow saudi's lead in many ways in terms of sentiment. >> the markets tend to react to geopolitical mention the a much sharper way athan other markets in the region. yesterday the markets here were closed. we had other markets in the gulf trading but there was not what a spillover effect. dubai, when it comes to volume on trade, the big stocks here are not at the best moment
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of the best few years. they had the worst week since june last week. numbers were not good. they are trading at very low levels. there could be more pressure, especially to those names that are very -- with foreign investors. yousef: the financial group -- joined me on monday. how the saudi scandal is impacting the saudi economy. >> sentiment is not great at the oment. developments had been flagging a bit. investment sentiments have been pretty damp. i think there is quite a lot going on behind the scenes in terms of legislation and getting the ministry lined with private
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sector investment and f.b.i. this is something you can't do in just a year. there is a lot going on behind the scenes. it is not sexy but it is pretty important. the f.b.i. is key to the whole project. i accept that. i think that will come through in the next year or two. but at the moment, the domestic investor is sitting on its hands a bit. >> ousef: ultimate think story -- ultimately the story relies on saudi investment. even though some of the capital coming in is drying up off the sentiment, impact on what is your outlook for what kind of price saudi arabia needs in terms of crude? >> actually people talk about the fiscal break price a lot.
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in my mind the most important metric the breaking this price. for that you're talking about maybe $48. there is actually quite a lot of wiggle room. it is when you fiscal and current account deficits together. that's when short sellers smell blood and at the moment, the fiscal position to my mind can be financed and the current account is back atsur plus anyway. i think there is quite a lot of room for saudi arabia to increase spending if it wants to. yousef: you can't help but wonder what this does to their position in vienna. we have put together a chart in interpret s of the six weeks of losses that have hit w.t.i. it is a series of losses we haven't seen in a long time. do you expect opec to make a ove at vienna?
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volatility in these markets makes it very difficult. >> taking a step back when opec -- in their agreement back in january 2017, the global economy was in a much stronger position. it was an upswing. it is very different now. i think the cuts are going to have to be that much deeper. there are russian companies that have new fields they want to bring on online. president putin indicated $70 is ok for him. that leaves saudi arabia doing all the heavy lifting. how much if they cut 500,000, yeah, i'm sure prices will respond. are they going to do that? it gives a free ride to shale producers as well. yousef: that is the thing. you the threat of the united
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states and the threat is much bigger than what happens happening with the u.s. dollar, rump tweeting for example. added to the output and maybe that means won't get a clear move in vienna. >> that is going to be weighing on their minds. i think shale is set for a bumper crop. the drills of uncompletes wells are up 30%. i think 2019 is looking like a bumper year for shale. the ill be weighing on opec delegates for shower. yousef: it is a tough gig. where are you at? >> i'm at 65. the reason i haven't gone down to 40 or 50 is because over the dollar. i think the dollar is looking
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weak in terms of the fiscal outlook if the u.s. and dollar weakness will put a floor on demand i think. even though we have obvious weakness in east asia and china. i think that will provide the floor. ousef: up next, can the city keep up its construction paces? this is bloomberg. ♪ ♪
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yousef: welcome back to "best of bloomberg daybreak: middle east." developers are plowing ahead with new builds. growth is slowly. the stock market is having its worst year since 2008. we have been looking at why dubai is losing its shine to ny investors who favored the emirate in the past for investors. >> some of it is structural and
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some of it is a method of supply and business that continued as usual. demand, population growth and spending from foreigner and -- investors. that is hurting the market. here there is a structural shift in the region. dubai is not able to assess really much. -- qatar he fact that hurt a lot of people's confidence in the region and the inability to put their money long-term. it is making a lot ever people worried about putting their money here. >> on that note what kind of response have we seen from the authorities so far?
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it feels like they have to balance the need to raise more revenue with the need to make a u.a.e. an appealing destination for capital and money. >> absolutely. dubai has been proactive about this a business executive in april sat with them for a meeting and asked what he could do to help them. so far we saw a flurry of decisions. earlier this year they decided to -- for schools. they have trying to reduce the cost of living and the cost of ing business here and trying relax ownership rules for foreigners. white a bit is happening. more of that we will hear throughout this year. yousef: one of the biggest issues dubai has been facing is property prices.
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he made the point this is going to sort itself out in two to three years. why does he keep building? >> this is the question everyone in this the property business asks. this is sinking the market in a way. the answer to that is that dubai's government gets quite a bit of residue from selling land for developers to build on. a lot of the big developers are throwing a lot of supplies into into the market. the government of dubai has some stake in them. we talk about -- and dubai properties and so on. a lot of supplies coming into the market just to give you an dea. it will be increased by 50% in just three years. splice huge amount of
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put in a market that is already facing a downturn. snotes
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yousef: there was fear monday of an economic cold war possibly dividing asia. we got more with our chief north asia correspondent who attended the summit before getting the thoughts of hanna anderson from j.p. morgan asset management. >> things definitely fell apart as the leaders and the vice president of the united states mike pence and also the leader of china gave their speeches at apec and cast a stark difference
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of opinions on the state of global trade. again, there was no communique that came out of it this weekend. i have covered a number of different apecs, at least seven or eight of them in my years covering the asia pacific and this time i saw no communique issued. usually they can at least agree on a watered down document. this time they could not agree on everything from global trade to the world trade organization and the belt and road nitiative. >> mankind has reached a crossroads. which direction should we choose? cooperation or confrontation? openness or closing one -- one's door? the interest of all countries and the future of mankind hinges n the choices we make. >> the united states will not
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change course until china makes it clear. not designed for any political agenda. >> now that the united states ffers a better option. we don't drown our partners in debt, course or compromise your independence. the u.s. deals openly, fairly. we do not offer a constricting or a one-way road. when you partner with us, we partner with you. we all prosper. >> they did not only just trade barbs, that traded failed pitches to the other 19 apec nations. the prime minister of singapore actually said apec nations at some point are going to have to
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choose between china or the united states. that's where we have gotten to. mike pence pretty much put a line under the underline, if you will. that is saying we're not going to change our course until china changes its ways. yousef: our chief north asia correspondent. let's bring in hanna anderson. she joins us from our hong kong studio. investors were for the most part moring for hope. there is the possibility of more gains in politics. >> this is perfectly in line with what we have been expecting. i think this is an appropriate preview of what is to come in
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2020 when president xi and trump sit down to discuss trade. there is no easy offramp when it comes to this conflict over trading practices and it will continue to buffett the apec region. i think investors are starting to factor that in. the apec summit is a pretty good indicator of what we can expect going forward. >> we were talking earlier about how the market reaction has been fairly muted to what has been an exceptional apec meeting. when are you watching in terms of gauging the market impact of these trade tensions. have you become an armchair soybean watcher like i have? look at those commodities on the agricultural front. i think for me one of the
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biggest things investors should be look watching are details ofr earnings from chinese corporations and u.s. corporations and other regional asia partners whose production cycles link through china or the u.s. they will be facing tough headwinds in 2019. yousef: they are going to weigh more on global economic growth. that appears to be trickling through some of the fed conversations. we put together a graphic to how what is happening. it has risen by a full percentage point since donald trump was elected in 2016. possibly think the is that we're going to see the fed push the pause button? >> i think it will remain a concern for investors. when it comes to the investment, you need to be more nuanced in your interpretation of how that
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feeds through. interest rates are rising because the fed is hiking rates. the fed is hiking rates because the u.s. economy is in a good position. the fundamental outlook, while you might see growth taken from the top from rising trade tensions and a cooling down of global trade, it is still going to continue to grow. it looks to be late cycle. i do think fed will continue to hike rates. first majorext, the public speech since the jamal khashoggi killing but fails to mention it at all. this is bloomberg. ♪
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yousef: welcome back to "best of bloomberg daybreak: middle east." let's get more now on saudi arabia and the king dodged the issue of the jamal khashoggi murder in his annual speech to the king's top advisors this week. his first address since he was killed. that focused on the war in yemen, iran, economic development, the oil market and palestine and reiterated full support for his son, the crown prince. >> working tirelessly to create more jobs for the saudi youth. the crown prince has focused on developing human capabilities and preparing the new generation
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for future jobs. ousef: we got more a bloomberg managing middle east editor. >> if they want to take the issue outside the news cycle, they clearly filled failed. if i was to make an educated guest, it is a scheduled speech. usually it is general. t doesn't go into specifics. second thing is they just made a big announcement in a press conference just a few days ago and on top of that you president trump almost on a dailey basis commenting well, the crown prince told me he didn't do it. he has nothing to do with it. the u.s. president dominating the air waves. you say something that can get under scrutiny and can trigger more negative publicity.
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at the risk of making a sweeping generalizeation. when the saudis listen to that speech, what is the reaction? do they think the king should have addressed what is a major controversy for their country? >> it really depends on who you talk to and where you talk. for example, our reporter in saudi arabia went with the king on his tour on one part of kingdom last week and people there, their primary concern has been jobs, jobs, jobs. that was -- the whole issue was fading there. it wasn't really a point of discussion. we have seen since the murder and since the kingdom came out and said actually it is not a turkish conspiracy. those were rogue government agents, in the urban part over the kingdom and big cities, there was massive shock.
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people cannot come to terms that even if it were rogue agents, it is the government. it depends on where you are and hat your priorities are. yousef: that is our managing editor with the latest on the saudi king's speech. let's talk about how this is affecting markets. the fallout, oil has bekleined. that has helped make saudi bonds the worst performers in the second half of the year. jumping almost 40% this quarter. has all this panic created a bond buying opportunity? let's get more from the director of fixed income. welcome to the program. let's jump straight into bloomberg. getting a better sense of where saudi 10 year yield is and how far we have come over the past few weeks. we added a line for the oil
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prices. are you a buyer of saudi paper or is this still a little bit too tricky for you? too much uncertainty? >> too much uncertainty, but it is a bit too dramatic. let's put things into perspective. the news flow from saudi came fter the saudi's had the inclusion. index making saudi -- among their peers. it was the best performer among peers back then. that's why saudi came off. we still have a lot of volatility. in general, if we compare the saudi reaction to other countries where there were sanctions, we had a collapse. russia, we had a drop. over all it is not really a collapse.
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it is ask questions later, i agree. tracy: good morning. t is tracy in hong kong. on that sanctions point, i am wondering, there is a little bit of risk. would not be enough to move the needle when it comes to the saudi budget, its fiscal profile or the markets capital profile? >> it is too broad. the way that it can unfold is very uncertain. sanctions for the time being, they are too little to impact the economy or the market. it does not seem like tensions will increase between trump. if they do, they have a strong balance sheet to support any sanctions that come in. the capital markets would be
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impacted and probably cause a selloff. ousef: we are waiting for news on how they plan to finance the purchase. how important is it in terms of deepening the bond market? how critical is it? >> the issue of bond, it would create more depth and demand. e have heard of the ipo. the bond market is the best way to go. tracy: how is the recent drop in the price of oil impacting your fixed income space? i imagine you're not going to inflationary an read through. when it comes to the energy price. that could be good news if it
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convinces the fed not to hike. >> at this stage, it was largely expected. we think that despite a drop in oil and dollar strength it does cause inflationary pressure, but it is not enough to change the fed's past. we think the fed will go in december and again twice next ear. yousef: what is your case for oil prices? it could bring about any meaningful shift at the wrong time of economic cycle. and oughly, the fed hikes oil prices, they are largely discounted in the market. oil will impact the fundamental, but we do not see oil going lower than this. the main risk in the region is the geopolitics.
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-- ef: coming up, ♪
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yousef: welcome back to "best of bloomberg daybreak: middle east." the biggest alliance was thrown into turmoil this week by the
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rrest of carlos ghosn. e was detained in tokyo. >> it was fascinating. this is supposedly a hastily arranged press conference to announce what was to all of us shocking news. it turned out to be a culmination of a several months long investigation led by nissan after a whistle employer complaint and led to carlos ghosn being detained by authorities . they said they would possibly remove him and greg kelly, who is being implicated in this. he said the concentration of power at the top in one man, he
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is controlling not only nissan but epublican all the -- enault and mitsubishi. what was most interesting, he repeatedly questioned carlos ghosn's leg which is historic. he is an iconic character. books have been written about him perhaps only carlos ghosn could have done it. i have books everywhere. i pull them out. anyway, the fact that there might have been some receptment for what he has built. he should take credit for turning nissan around. he wanted to push forward a broadening of the alliance and a merger and that could give more
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power to the french interests and the french government which owns 15% of renault. yousef: we have been talking to some of the analysts covering the companies and the biggest concern of course is whether the alliance with renault and mitsubishi is still going to be functional. what happens next? where do we go from here? >> it is going to be a very interesting couple of days. right after this report, i'm heading to tokyo and will be there for the thursday board meeting in yokohama to find out f he is going to be out there. is he in jeopardy of a c.e.o. position at renault and also chairman of mitsubishi. we don't know the fates there. we know the renault board will be meeting tuesday in paris or france somewhere to discuss this. we got a statement from the mitsubishi c.e.o. right now no move right now to remove carlos ghosn but they will investigate and decide. you're right about the analysts.
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they have widening opinions. one saying this likely was a gulf opening up between renault and nissan. it seems as though there was a widening gulf because keep in mind, renault owns 45% of nissan. nissan only owns 15% of renault with no voting rights. there was an unequal if you will, some would say, especially the japanese and nissan would ay it was an inequitable partnership. the french would probably disagree. >> you touched on this a little bit. why the political connotations here? >> well, the political connotations can get a little bit sensitive of course. this is a foreigner who took over a corporate japanese giant that was struggling and turned it around and took wide credit for that.
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was there as some have alluded to a palace coup by the likes of the c.e.o. who was his protege? there were clear risks developing between him and carlos ghosn especially on the issue of a merger. carlos ghosn was trying to submit his legacy. that was complex shareholder structure. nissan didn't want to go further into a merger. yousef: president trump this week publicly thanked saudi arabia for lower oil prices. he said the jamal khashoggi murder would not jeopardize the relationship between washington anduri yad. -- and riyadh. >> there is a bunch of different
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factors. to step back and give a little bit of context to this, in october you had prices around a four-year high over concern that the u.s. would reimpose sanctions on iran and you'd have supply shortages. the u.s. did reimpose the sanctions on iranian oil exports and also granted waivers to eight countries. you saw prices come down after this. you have u.s. production at a record high. that is obviously contributing to more supply that is available globally. the other factor is there is concerns of an economic slowdown. you're seeing stocks fall off the last few days. there is growing concern about demand for oil that is contributing to lower prices. brent right around $63. >> at the same time, we had news yesterday that saudis are
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producing at a record at least in early november. that is kind of weird when they are also supposed to be talking about a production cut agreement. s what driving their output so high? >> right. they did boost output to a record, bloomberg reported today. i think they had boosted that in anticipation of these iranian sanctions. a lot of their customers were asking them, you know, boosting their demand and their purchases. i think the record output was in response to that. what will be having the to see what the production is like over the next few weeks or the next month. we have the opec meeting coming up on december 6. the main topic is going to be are they going to agree on renewing supply cuts with prices as low as they are? it will be interesting to see what the saudis do and if they sustain that production. there is a lot of questions and speculation that opec and saudi may look at lowering production
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or even production cuts like we ave seen the last few years. yousef: up next, the market mystery deepens. ♪
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yousef: welcome back to "best of bloomberg daybreak: middle east." asia pacific stock requesters sliding as we went to air on tuesday after a torrid session in the states when tech stocks overit by renewed concerns trade sessions. >> just looking at the data in asia, and i think asia is a kind f canary in the coal mines for
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global activity from p. mimbings' to exports to -- p.m.i.'s and exports seeing this asia growth is decrediting. -- decelerating. i think it is a key bellwether for exports. also i think china's slowing down is weighing on the region protectionthis trade is weighing on businesses. we think things are going to get worse in terms over the growth slowdown. this is at a time, don't forget, where q.e. has turned to tightening and the fed is still raising rates. we think it is going to get rse before it gets better in asia. particularly china in the first quarter of 2019. yousef: i want to get your view
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as to what we can really draw in terms of lessons from what is happening in some of those u.s. - momentum starts. the latest example of how this darker outlook for growth that you point out is trickling through and what is going to stop this? they came and they went and made things worse. midterms, no. falling yields definitely didn't help either. what is going to stop this? >> i think it is tough -- one thing i think to think about is the stocks did go up a lot. it is not surprising to see some correction. ultimately i think things that are going to stop this, one, i think keeping is going to be policy. think when the fed ultimately pauses and most view that will happen after a hike in march, and i think also probably around
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that time as china growth and particularly property market comes up more, we will see more significant china policy stimulus. i think the combination of those two things bust plus evaluations being more attractive than what they are right now will start to lead to a bottom and ultimately a pick-up. >> let's dig into the u.s. policy side of things. one of the interesting things we saw during the market action yesterday was a statement from the national association of home builders. they released their housing market index for the u.s. it was not as good as some expected. it actually dropped eight points in november. what was more interesting is they released their commentsry and said recent policy decisions have lacked commentary on housing. policy makers need to focus more on residential market conditions. this is them essentially calling out the fed and blaming it for
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some of the weak housing data. how are you viewing u.s. policy at the moment? is the fed making a mistake? >> the housing sector is probably one of the most interesting sectors. not surprising it is starting to be affected. the fed last week was pretty monumental. ere was a shift going on towards a more dovish stance. j.d. power talked about raising rates too fast. if you raise rates too slowly the risk is overheating. now he is introducing a bit more symmetry. they are willing to because of the uncertainty raise rates a bit slower and next year, i think the analogy they gave, very colorful analogy he gave, if you enter a room and lots of furniture and the light goes out, you're going to walk pretty
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slowly and feel your way. interestingly, the next day, the vice chair mentioned the same thing and even said you don't have shoes on and you could stub your toe. i think the fed is starting to signal they could pause next year. we think that will happen after the march hike. yousef: meanwhile, the pain for emerging markets may be ending after 2018. goldman sachs is forecasting a return to happier days next year. ith returns about 12%. we got more with bloomberg's managing editor for global and emerging markets. >> the most eye-catching point i'm making is that asia is going to be probably the source of a lot of this action. one of the -- if you like the points, the russians are behind that call is that china is going to provide a backstop to any,
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you know, weakness that might continue to emanate from the chinese stock market and when you consider that china counts for about 30% of the emerging market index, that is quite a significant point. there are other points that still make up the rationale here but that is the biggest call i would think in terms on a regional basis at least. >> so on the china point, we have seen some speculative money powering into china stocks for this reason. how much of the goldman call is pegged to the u.s. economy? >> well, that is a very good point. part of the study here is that goldman has said that a lot of the selloff that we have seen the weakness in e.m. stocks today has not been so based around the fed interest rate path. it has been more a reflection of
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sentiment towards global growth and what they are saying here is that if if the u.s. and this is their prediction, that the u.s. continues to grow through 2020 and get these not so bad growth rates out of places like china and india, that should sustain demand for emerging markets going forward which have according to goldman held up pretty well during what has been a tumultuous year. yousef: you can catch day break every sunday through thursday here on bloomberg tv at 8:00 a.m. dubai time. this is bloomberg. ♪ loomberg. ♪
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